Reading tealeaves on the potential impact of the privatization of tea estates in Rwanda

The Poverty Reduction Strategy of the Government of Rwanda seeks to unlock the growth and poverty reduction potential of the tea sector through the privatization of tea estates. This paper uses the logic of causal inference and data from the 2004 Quantitative Baseline Survey of the tea sector to assess the potential impact of the privatization program. This entails anormalized comparison of productivity outcomes to account for household heterogeneity in terms of observable and non-observable determinants of these outcomes. The paper also compares living standards between tea and non-tea households. Three main findings emerge from the analysis. Productivity outcomes are generally better in the private sector than in the public sector. Male-headed households outperform female-headed households along all dimensions considered here. And tea households tend to be better off than non-tea households.Crops&Crop Management Systems,Access to Finance,Poverty Monitoring&Analysis,Small Area Estimation Poverty Mapping,Housing&Human Habitats

Wage Subsidy and Labour Market Flexibility in South Africa Delfin S. Go, Marna Kearney, Vijdan Korman, Sherman Robinson and Karen Thierfelder

In this paper, we use a highly disaggregate general equilibrium model to analyse the feasibility of a wage subsidy to unskilled workers in South Africa, isolating and estimating its potential employment effects and fiscal cost. We capture the structural characteristics of the labour market with several labour categories and substitution possibilities, linking the economy-wide results on relative prices, wages, and employment to a micro-simulation model with occupational choice probabilities in order to investigate the poverty and distributional consequences of the policy. The impact of a wage subsidy on employment, poverty, and inequality in South Africa depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labour are complements in production. The desired results are attainable only if there is sufficient flexibility in the labour market. Although the impact in a low case scenario can be improved by supporting policies that relax the skill constraint and increase the production capacity of the economy especially towards labour-intensive sectors, the gains from a wage subsidy are still modest if the labor market remains very rigid.

Wage subsidy and labor market flexibility in south Africa

In this paper, the authors use a highly disaggregate general equilibrium model to analyze the feasibility of a wage subsidy to unskilled workers in South Africa, isolating and estimating its potential employment effects and fiscal cost. They capture the structural characteristics of the labor market with several labor categories and substitution possibilities, linking the economy-wide results on relative prices, wages, and employment to a micro-simulation model with occupational choice probabilities in order to investigate the poverty and distributional consequences of the policy. The impact of a wage subsidy on employment, poverty, and inequality in South Africa depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labor are complements in production. The desired results are attainable only if there is sufficient flexibility in the labor market. Although the impact in a low case scenario can be improved by supporting policies that relax the skill constraint and increase the production capacity of the economy especially towards labor-intensive sectors, the gains from a wage subsidy are still modest if the labor market remains very rigid.Labor Markets,Labor Policies,,Economic Theory&Research,Access to Finance

Economy-wide and distributional impacts of an oil price shock on the south African economy

As crude oil prices reach new highs, there is renewed concern about how external shocks will affect growth and poverty in developing countries. This paper describes a macro-micro framework for examining the structural and distributional consequences of a significant external shock-an increase in the world price of oil-on the South African economy. The authors merge results from a highly disaggregative computable general equilibrium model and a micro-simulation analysis of earnings and occupational choice based on socio-demographic characteristics of the household. The model provides changes in employment, wages, and prices that are used in the micro-simulation. The analysis finds that a 125 percent increase in the price of crude oil and refined petroleum reduces employment and GDP by approximately 2 percent, and reduces household consumption by approximately 7 percent. The oil price shock tends to increase the disparity between rich and poor. The adverse impact of the oil price shock is felt by the poorer segment of the formal labor market in the form of declining wages and increased unemployment. Unemployment hits mostly low and medium-skilled workers in the services sector. High-skilled households, on average, gain from the oil price shock. Their income rises and their spending basket is less skewed toward food and other goods that are most affected by changes in oil prices.Economic Theory&Research,,Labor Policies,Markets and Market Access,Access to Finance

Reading Tealeaves on the Potential Impact of the Privatization of Tea Estates in Rwanda

The Poverty Reduction Strategy of the Government of Rwanda seeks to unlock the growth and poverty reduction potential of the tea sector through the privatization of tea estates. This paper uses the logic of causal inference and data from the 2004 Quantitative Baseline Survey of the tea sector to assess the potential impact of the privatization program. This entails a normalized comparison of productivity outcomes to account for household heterogeneity in terms of observable and non-observable determinants of these outcomes. The paper also compares living standards between tea and non-tea households. Three main findings emerge from the analysis. Productivity outcomes are generally better in the private sector than in the public sector. Male-headed households outperform female-headed households along all dimensions considered here. And tea households tend to be better off than non-tea households

Wage Subsidy and Labour Market Flexibility in South Africa

We use a general equilibrium model to analyse the employment effects and fiscal cost of a wage subsidy in South Africa. We capture the structural characteristics of the labour market with several labour categories and substitution possibilities, linking the economy-wide results to a micro-simulation model with occupational choice probabilities to investigate the poverty and distributional consequences. The employment impact depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labour are complements in production. The impact is improved by supporting policies, but the gains remain modest if the labour market is rigid.